The Benefits of Managed Futures

The Benefits of Managed Futures

Opportunities to reduce volatility risk

Managed Futures offer the opportunity to reduce the volatility risk of a traditional stock/bond portfolio. Modern Portfolio Theory was developed by the Nobel Prize winning economist Dr. Harry M. Markowitz. Dr. Markowitz stated that a portfolio’s efficiency can be increased by diversifying across asset classes that have low to negative correlations. The goal is to decrease the portfolio’s volatility risk.

Opportunities to enhance return

Dr. Lintner in his 1983 study, found that including managed futures in a combined portfolios of stocks (or stocks and bonds) show substantially less risk at every possible level of expected return than portfolios of stocks (or stocks and bonds) alone.”

The Ability to profit in risking and falling markets

Managed futures investors can profit in many different types economic environments. This is partly because the futures markets are diverse and often exhibit independent price movement. Commodity Trading Advisors can take advantage of price trends regardless of whether the market is rising or falling. For instance, if they feel that the markets have the potential to rise then they can buy in anticipation of a price increase. Conversely, if they anticipate the market to fall then they can sell short.

Opportunities to participate in global markets

With the expansion of global futures exchanges, CTAs can now diversify their clients’ portfolios by geography as well as by market sector. Investors can participate in at least 150 worldwide futures markets trading a variety of products including financial instruments, stock indexes, precious metals, agricultural commodities, tropical products, currencies, and energy products. Trading advisors have many possible opportunities to profit from the broad array of non-correlated markets. Increased market volume and liquidity makes the markets more attractive as market efficiencies improve. CTAs offer investors benefits similar to those experienced with mutual funds and other investment advisors.

There is a risk associated with Managed Futures

The addition of managed futures to a client’s portfolio does not mean that a portfolio will be profitable or that it will not experience substantial losses and that the studies conducted in the past may not be indicative of current time periods or of the performance of any individual CTA.

The addition of managed futures to a client’s portfolio does not mean that a portfolio will be profitable or that it will not experience substantial losses and that the studies conducted in the past may not be indicative of current time periods or of the performance of any individual CTA.

The S&P 500 indices are designed to reflect all sectors of the U.S. equity markets. The S&P 500 includes 500 blue chip, large cap stocks, which together represent about 75% of the total U.S. equities market. Companies eligible for addition to the S&P 500 have market capitalization of at least US$3.5 billion. The TR Index accounts for the reinvestment of dividends.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. As of May 30, 2011.

The CISDM Equal Weighted CTA Index is an equal weighted index of CTAs maintained by The Center for International Securities and Derivatives Markets at the University of Massachusetts Amherst. It reflects the average performance of Commodity Trading Advisors reporting to the CISDM Hedge Fund/CTA Database. Each CTA must have at least $500,000 under management and at least a 12-month track record.

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PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. AN INVESTMENT IN FUTURES CONTRACTS IS SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK AND IS SUITABLE ONLY FOR PERSONS WHO CAN ASSUME THE RISK OF LOSS IN EXCESS OF THEIR MARGIN DEPOSITS. YOU SHOULD CAREFULLY CONSIDER WHETHER FUTURES TRADING IS APPROPRIATE FOR YOU IN LIGHT OF YOUR INVESTMENT EXPERIENCE, TRADING, OBJECTIVES, FINANCIAL RESOURCES, AND OTHER RELEVANT CIRCUMSTANCES.